What Is the Difference Between Stock Options and Employee Stock

question 18

Multiple Choice

What is the difference between stock options and employee stock ownership plan (ESOP) ?

• A) Stock options carry significant risk whereas ESOPs are risk-free.
• B) Stock options are usually used with top management whereas ESOPs are provided to all employees.
• C) In stock options, stocks are placed into a trust whereas ESOPs give employees the right to buy a certain number of shares of stock.
• D) Under stock options, employees can sell their stocks whereas ESOPs do not allow employees to sell their stocks.
• E) Earnings from stock options are exempt from income taxes whereas earnings from ESOPs are taxable.

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Definitions:

Resell

The act of selling a product or service that one has bought to another buyer.

Pay

To give money in exchange for goods, services, or to settle a debt.

Perfect Tender Rule

A rule requiring the seller to deliver goods to the buyer that exactly meet the terms of the contract, without any deviation.

Defective

A condition wherein a product does not operate as intended or expected, often leading to a potential hazard or inefficiency.